Inside the Hotel Industry’s Plan to Combat Airbnb

In the past, hotel executives played down Airbnb’s impact
on their industry, but documents reveal a “multipronged, national campaign” to
rein it in. Credit Minh Uong/The New York Times

SAN FRANCISCO — Last year, Airbnb underwent a rough
regulatory patch.

The short-term rental company became a Federal Trade
Commission target last summer after three senators asked for an investigation
into how companies like Airbnb affect soaring housing costs. In October, Gov.
Andrew M. Cuomo of New York signed a bill imposing steep fines on Airbnb hosts
who break local housing rules.

The two actions appeared unrelated. But one group quietly
took credit for both: the hotel industry.

In a presentation in November, the American Hotel and
Lodging Association, a trade group that counts Marriott International, Hilton
Worldwide and Hyatt Hotels as members, said the federal investigation and the
New York bill were “notable accomplishments.”

Both were partly the result of a previously unreported
plan that the hotel association started in early 2016 to thwart Airbnb. The
plan was laid out in two separate documents that the organization presented to
its board in November and January. In the documents, which The New York Times
obtained, the group sketched out the progress it had already made against
Airbnb, and described how it planned to rein in the start-up in the future.

The plan was a “multipronged, national campaign approach
at the local, state and federal level,” according to the minutes of the
association’s November board meeting.

The documents provide an inside look at how seriously the
American hotel industry is taking Airbnb as a threat — and the extent to which
it is prepared to take action against it.

In the past, hotel executives typically played down the
privately held company’s impact on the $1.1 trillion American hotel industry.
As recently as December, a Marriott executive dismissed Airbnb as not “really
making headway in the corporate environment, which is really our
bread-and-butter business.”

Yet there is now little mistaking that Airbnb is
encroaching on the traditional hotel business. The company, which is based in
San Francisco, was founded in 2008 as a way for people to easily list and rent
out their spare rooms or their homes online. Since then, about 150 million
travelers have stayed in three million Airbnb listings in more than 191
countries, according to the company.

Airbnb has raised more than $3 billion and secured a $1
billion line of credit, according to the research firm CB Insights. Brian
Chesky, Airbnb’s chief executive, has said the company could be ready to go
public in a year. Investors have pegged Airbnb’s value at around $30 billion;
in contrast, Hilton’s market capitalization is $19 billion and Marriott’s $35
billion.

The Hotel Industry’s 2017 Plans to Combat Airbnb

“Objective: Build on the success of 2016 efforts to
ensure comprehensive legislation in key markets around the country and create a
receptive environment to launch a wave of strong bills at the state level while
advancing a national narrative that furthers the focus on reining in commercial
operators and the need for commonsense regulations on short-term rentals.”

All of that has hurt hotel operators. Airbnb has brought
hotel pricing down in many places during holidays, conventions and other big events
when room rates should be at their highest and the industry generates a
significant portion of its profits, said Vijay Dandapani, chief executive of
the Hotel Association of New York City, which works with the American Hotel and
Lodging Association.

The industry’s plan against Airbnb shows “the hotel
cartel is intent on short-sheeting the middle class so they can keep
price-gouging consumers,” Nick Papas, a spokesman for Airbnb, wrote in an
email. “With more than 250 government partnerships over the last year, we have
shown our seriousness of purpose when it comes to putting in place fair rules.”

The national hotel association said its push against
Airbnb was not about the platform’s financial impact on hotels.

“Airbnb is operating a lodging industry, but it is not
playing by the same rules,” Troy Flanagan, the American Hotel and Lodging
Association’s vice president for state and local government affairs, said in an
interview.

The main prongs of the association’s plan to constrain
Airbnb include lobbying politicians and state attorneys general to reduce the
number of Airbnb hosts, funding studies to show Airbnb is filled with people
who are quietly running hotels out of residential buildings and highlighting
how Airbnb hosts do not collect hotel taxes and are not subject to the same
safety and security regulations that hotel operators must follow.

The group said it would focus its efforts in key markets,
including Los Angeles, San Francisco, Boston, Washington and Miami.

The efforts were spearheaded last year by Katherine
Lugar, chief executive of the American Hotel and Lodging Association. The trade
group began to form alliances with politicians, affordable housing groups and
neighborhood associations. The industry also forged relationships with hotel
labor unions — which it typically faces off against on many issues — about
dealing with Airbnb.

In total, the association has a $5.6 million annual
budget for regulatory work.

In New York, the association began working with local
affiliates to lobby state legislators and the governor’s office to adopt
steeper fines for New York City hosts that list on Airbnb in violation of local
law, a move that hotel operators had hoped would help increase their business.

The association also sought help from politicians in Washington.
In its documents, the group said it had worked with Senators Brian Schatz of
Hawaii, Elizabeth Warren of Massachusetts and Dianne Feinstein of California.
The three Democrats sent a letter to the Federal Trade Commission in July
“raising concerns about the short-term rental industry,” one of the hotel
association documents said.

The association also met with legislators and attorneys
general in dozens of other states to discuss how Airbnb hosts often do not
comply with rules imposed on hotels, like anti-discrimination legislation,
local tax collection laws, and safety and fire inspection standards. In some
markets, the group said, Airbnb is dodging payment of local lodging taxes. In
other places, it encouraged officials not to collect taxes from Airbnb hosts so
as not to legitimize short-term rentals.

The association claimed legal and regulatory victories
last year in Chicago, San Francisco and Los Angeles, as well as in states like
Virginia, Tennessee and Utah, where laws were being passed to restrict Airbnb
activity. The organization also funded research conducted by a professor at
Pennsylvania State University to show that many Airbnb hosts were breaking the
law.

“We are trying to showcase and bust the myth that Airbnb
supports mom and pop and helps them make extra money,” Mr. Flanagan, of the
American Hotel and Lodging Association, said. “Homesharing is not what this is
about.”

This year, the association plans to fund more anti-Airbnb
research and roll out a testimonial campaign of people hurt by home sharing,
“to provide a counterweight to Airbnb’s strategy of presenting a unified,
working-class face,” according to the group’s documents. The campaign will be
“a cornerstone of the 2017 communications strategy,” it said.

Edward Walker, a professor at the University of
California, Los Angeles who focuses on grass-roots lobbying by businesses, said
such a public call to mobilize against Airbnb was unusual. But because Airbnb
itself has “quite effectively gotten hosts involved in its advocacy work,” the
hotel industry will have to break with conventional lobbying, too, he said.

The hotel association’s efforts have succeeded in
disrupting some Airbnb hosts. Sebastian de Kleer, owner of Globe Homes, a
short-term rental company based in Los Angeles, had listed some of his
properties on Airbnb for more than a year. But Airbnb canceled his Los Angeles
listings from its site in March 2016 after the hotel association argued to
local politicians that Airbnb hosts like Mr. de Kleer were raising the cost of
housing in the city by renting out properties for short-term use rather than
for long-term tenants.

“Because there was so much pushback here in Los Angeles,
we got kicked off” Airbnb, Mr. de Kleer said. “That was $250,000 in
reservations. It was not very professional.”

Mr. de Kleer said he had since gotten over his removal
from Airbnb in Los Angeles. He still uses the site to list his many properties
in Palm Springs, Calif., where short-term rentals are common and are not
controversial.

Doris Burke contributed research.

Follow Katie Benner on Twitter @ktbenner.

A version of this article appears in print on April 17,
2017, on Page B1 of the New York edition with the headline: Hotels Make Battle
Plans as Airbnb Poses Threat.

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